Global warming has significantly reduced summer ice coverage in the Arctic region, providing long-awaited opportunities for the shipping industry to open new routes through a region known for its harsh navigational conditions. If a shortcut between Asia and Europe via the Northern Sea Route (NSR) is adopted, significant energy saving and pollution reduction are possible compared with conventional southern routes. However, opinions in literature differ regarding this shortcut’s economic viability. We present an analysis from the perspective of COSCO, China’s largest container sea freight operator. We perform a cost–benefit analysis under several scenarios considering the following current realities: (1) declining oil prices not seen for decades, even lower than the lowest prices assumed in previous studies; (2) declining Russian NSR tariff as an effort to attract shipping traffic; (3) possible emission control areas along a northern route may require much cleaner energy and thus impact costs not studied in previous models; and (4) the capital cost difference between a hired and a self-owned vessel. Classical case studies of shipping routes between Shanghai and Rotterdam are adopted for comparison. We explain how different factors impact the shipping costs and to what extent can the NSR be economically viable. Occasional usage of NSR (e.g., one time transit) is unlikely to be more profitable given the higher unit transportation cost, but the route could be economically competitive in terms of the total profits earned for continuous usage. A more aggressive scenario which requires ships on the NSR to switch to much cleaner fuel would erode this route’s competitiveness, but extra environmental benefits should be taken into consideration if future carbon emission trading schemes include the shipping industry.

Emission governance of air pollutants from ships is a common challenge for the world's shipping industry. Under the framework of the International Maritime Organization (IMO), Europe, North America, and other developed regions and countries have established strict ship Emission Control Areas (ECAs). With some of the largest ports in the world, China suffers severe air pollution from ships, posing a threat to the air quality and public health of the coastal cities. To strengthen the control and supervision over air pollutants, such as ship-emitted sulfur oxides (SO_x) in coastal areas, China issued a Sulfur Emission Control Area (SECA) policy for ships in January 2016. However, the new SECA policy lags far behind IMO's existing ECA policies, and continues to face many challenges during implementation. This paper outlines the main framework of China's ship SECA policy, analyzes the legal governance basis, discusses major potential challenges for implementing the policy, and puts forward suggestions for future governance. This research aims to promote the effectiveness of China's sulfur emission-reducing SECA policy by putting forth novel ideas for policymakers and stakeholders.